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Remarks of Commissioner Rebecca Dye Washington Council on International Trade

May 16, 2017

Remarks of Commissioner Rebecca Dye
Washington Council on International Trade

I was very pleased when Steve asked me to speak to you tonight. I love Seattle, and it’s been years since I was able to visit.

Recently, I've had several great conversations with John Wolfe, the Northwest Seaport Alliance CEO, about the exciting things he has implemented and planned for the former ports of Seattle/Tacoma.

We at the Commission are especially pleased that the Northwest Seaport Alliance has been successful, because it was formed under the authority of the FMC's Shipping Act of 1984.

I've recruited John to be one of my "port anchors" for the export phase of the Federal Maritime Commission's Supply Chain Innovation Teams project that begins in July.

More about that later.

Trade and Trends in Shipping

You may have heard, but there's a lot going on in Washington! Last week, the Secretary of Commerce announced an agreement with China that will promote access to Chinese markets for American beef exporters, and others.

In addition to trade agreements, there is also reason to be optimistic that America’s international trade may get a boost from tax policy revisions that significantly increase American economic growth. That will be good news for the container shipping industry, U.S. trade, our nation's seaports, and American consumers.

Recently I testified with my fellow Commissioners before the Senate Commerce Committee's Subcommittee on Surface Transportation. The Members of the Subcommittee wanted to discuss, in addition to the FMC's Supply Chain Innovation Teams project, changes in the liner shipping industry. These included larger container vessels, the Hanjin bankruptcy, and the impending consolidation of the three major Japanese lines.

We all know that the liner industry has faced daunting financial challenges in the last few years. But international trade volumes have been increasing, and the supply/demand gap that led to $5 billion in industry losses last year may balance enough to allow lines to earn a profit in 2017.

Over the last five years, carriers have reportedly eliminated roughly $40 billion in expenses. Rate competition, however, remains strong. The strength of the dollar and the outlook for Asian economies—especially China—remain topics of concern for our exporters. And efforts to modernize port facilities and improve the performance of our supply chain freight delivery system remain a challenge.

I think, however, there remains reason to be optimistic. As I've observed through my involvement in the Commission's Supply Chain Teams initiative, some great work is being done at ports here and across the country to systematically improve our international supply chain processes and performance.

As part of my Supply Chain Innovation Teams project, we have held in depth interviews with our largest port directors concerning what they see as their greatest strengths, weaknesses, opportunities, and threats. Our port directors are an impressive group, all aggressively preparing to meet the challenges of a dynamic ocean shipping industry.

Ocean Shipping Deregulation

The Federal Maritime Commission is an independent agency, but we are enthusiastically embracing the new Administration's priority on deregulation. As someone who has spoken out for the removal of regulations that are unnecessarily burdensome, I was delighted to see the new Administration's emphasis on restraining new regulations and reviewing—with a critical and open mind—existing regulations.

When I arrived at the FMC, I assumed that the Commission would continue the gradual deregulation of the container shipping industry that started with the enactment of the Ocean Shipping Reform act of 1998.

I handled that legislation for the House of Representatives as maritime counsel for the Transportation and infrastructure Committee, and although we substantially deregulated ocean shipping in that bill, there was much to be accomplished.

The Reform Act included a liberalized exemption authority that allows the Commission to grant a regulatory exemption if we determine that the exemption will not result in a substantial reduction in competition or be detrimental to commerce.

I support using this authority to remove unnecessary government compliance costs from the supply chain. We did that last March when we revised our regulatory requirements for service contract filing. I support much more deregulatory action in the near future.

Ms. Karen V. Gregory, the Managing Director of the Commission, has been designated as our Regulatory Reform Officer. Ms. Gregory is now leading an internal team that is identifying those regulations that have become less relevant in today’s fast moving commerce, are more burdensome than current business needs require, and otherwise need updating and revision.

They will then establish a definitive timeline within the agency to move those items to a vote before the Commission. This initiative is consistent with the January 30th "Presidential Executive Order on Reducing Regulations and Controlling Regulatory Costs."

While the Commission may not be technically required as an independent agency to take this step, I believe that it is the right action to take and is consistent with the broader deregulatory history and scope of the Shipping Act. Today we have a real opportunity for fundamental deregulatory change. So I encourage you to be bold in the ideas and proposals you offer. Think big!

SUPPLY CHAIN INNOVATION TEAMS

As for the Commission’s Supply Chain Innovation Teams initiative, I’ll try to give you an overview by explaining briefly what the teams are, what they’ve been doing so far, and what I hope they’ll accomplish.

What are the supply chain innovation teams?

There are six teams in all – three focused on the import supply chain, three on the export supply chain.

Our project is built on two key concepts—small teamwork and process innovation.

Our teams discuss current and anticipated challenges to reliable and resilient international supply chain operations – and, in particular, were tasked to identify one significant operational improvement that they could collectively implement.

Team members were asked to "step out of their silos" and consider the U.S. international supply chain from end-to-end.

Two areas of consideration were excluded – infrastructure investments and port performance metrics. This project was designed to focus on the systemic nature of the supply chain, and not just on internal port operations.

Team discussions usually involved all team members; but occasionally cross-team, groups composed of, for example, terminal operators, chassis providers and drayage companies, met to work through specific information needs and procedures. Their results were reported back to the other participants.

All three import teams quickly focused on supply chain visibility as the best way to promote supply chain reliability and resilience. In candid conversations, they developed the critical information needs of supply chain actors.

What do we expect to come out of the innovation team process?

First, what we don’t expect: We’re working towards commercial process innovation -- not new government programs or new sets of regulations.

Because the import teams focused on supply chain visibility, and developing a national seaport information portal as the vehicle for achieving enhanced visibility, my hope is that we can build on that beginning in July. That would involve our soon to be launched export teams identifying the critical information needs of export supply chain actors.

Once our export teams have established the information each actor needs, when they need it and who else in the supply chain can provide it --the next logical step would be to ask outside experts to help us assess whether our concept of a national information portal makes sense and, if so, how it might best be structured.

I believe that injecting greater digital visibility into our international supply chain system will strengthen our overall freight delivery system and significantly boost American economic competitiveness.